A) market rate of interest is likely to fall
B) Central Bank is no longer making loans to commercial banks
C) Central Bank is following an easy money policy
D) Central Bank is following a tight money policy
Correct Answer: D
Solution :
Exp. [d] Increase in bank rate means that interest rates will rise. This means that money becomes dearer and borrowing becomes more expensive. This squeezes out liquidity from the economy and so, it can be said that RBI is following a tight money policy.
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